How to avoid foreign exchange rip-offs on your holidays
The rates you will get at airport foreign exchanges are worse than you might think – planning ahead really is worthwhile, says Ruth Jackson.
If you're the kind of person who tends to leave buying holiday money until you get to the airport, then you probably already know you're not getting the best rate possible. However, it's worth being aware of quite how much money you're losing by leaving it until the last minute.
Live currency rates at airports for euros and US dollars were, on average, 13% worse than the market rate, according to figures from foreign-exchange company FairFX. In the worst example, Moneycorp at Stansted airport was offering just €0.90 to the £1. This compares to a live market rate of €1.134 to the pound, meaning someone exchanging £500 would lose out on £103. Stansted also offered the worst rate for dollar exchange at $1.0378 to the pound, 24% worse than the market rate.
To get the best price for your holiday money, use a comparison tool such as MoneySavingExpert's TravelMoneyMax site, which allows you to compare rates across a number of outlets, including delivery rates and pick-up. Keep in mind that you if go to a UK bureau and pay with a credit card rather than a debit card, this counts as a cash withdrawal, so there will be a fee and interest even if you repay the bill in full, says Helen Saxon on MoneySavingExpert. So use your debit card or cash to buy holiday money.
If you do order cash for collection in advance, read through the bureau's terms and conditions to see if you will be able to take advantage of any currency swings that happen between then and when you pick up the cash some bureaux will let you cancel for free or for a small fee if the rate has improved since you put in your order. And even if you leave getting holiday cash until nearly the last minute, keep in mind that you can usually get a better rate by ordering online for airport collection.
As well as getting cash changed before you go away, you may also want to consider getting a prepaid foreign-currency card that you can load with cash to spend while you are away. WeSwap, FairFX and Caxton FX all have good deals. Just make sure you check for any admin or usage fees that could cut into your spending. Finally, while you are on holiday, make sure you pay for everything in the local currency rather than sterling, in order to avoid hidden exchange fees shops will often give you the choice when you come to pay.
The best cards for your holiday cash
When you're abroad, you can save a fortune by using a credit or debit card designed for foreign spending, as they allow you to avoid non-sterling transaction and withdrawal fees.
The best credit card to pack for your holidays is Halifax's Clarity card. It has a near-perfect exchange rate, no non-sterling transaction fees, and there is no charge for cash withdrawals. Just keep in mind that you will be charged 18.9% interest on cash withdrawals from the minute the money is in your hand until you pay it off. If you want to withdraw money on your credit card, then Barclaycard's Platinum travel card may be a better option. It charges no interest on cash withdrawals, provided you pay off the balance in full when your credit card bill arrives. It also has no fees when you use it abroad. But don't use this card in the UK, as you'll pay a 2.99% cash withdrawal fee and interest will be charged from the day you withdraw the cash.
The best debit-card choice is app-based Starling Bank's card, which levies no cash withdrawal fees or non-sterling transaction fees anywhere in the world. Note that you can only make three withdrawals a day, up to £300 in total.
Pocket money your shares could foot bankruptcy bills
If you think the assets you hold with brokers cash, shares in nominee accounts, Isas and so on are ring-fenced and protected, then think again, says John Lee in the Financial Times. Accountant PwC which has been brought in as administrator to failed stockbroker Beaufort Securities "can seemingly take administration costs from clients' funds where they are not covered by the firm's assets". Costs are projected to come to up to £100m.
While Beaufort clients with funds of up to £50,000 will be covered by the Financial Services Compensation Scheme, 700 people with larger portfolios are expected to bear much of the administration costs. Although PwC has cited post-financial-crisis legislation that allows for this, Lee has via the House of Lords asked the government to explain "the legal basis that allows administrators of failed stockbroking firms to levy charges on clients' assets". There are "clearly serious wider implications here".
A detailed analysis of how pensions freedom rules are being used has revealed how quickly savings are being depleted, says Sam Brodbeck in The Daily Telegraph. Prior to the rule changes, very few people kept their savings invested in retirement. Those who did tended to use a financial adviser. However, now one in three people are running their own investments in retirement, prompting fears that they need more "support and protection".
Of 18,000 Royal London customers all of whom must have taken financial advice 80% had taken more than 4% a year from their fund, with nearly one in five taking more than 10%. The "4% rule" suggests limiting your withdrawals to no more than 4% of your total fund each year, to boost the odds of it lasting for the 20 or 30 years of a typical retirement. Yet even this is based on optimistic assumptions. Those who withdraw more now may be storing up trouble.
The Financial Conduct Authority (FCA), the City regulator, has announced plans to make it easier for home-owners to shop around for the best mortgage, after it found that nearly one in three people fail to find the cheapest deal, says The Guardian. People who missed out on the best deal ended up paying an average of £550 a year more than they needed to, according to the FCA. The regulator has proposed a rule that would require lenders to make the necessary eligibility and other qualification criteria available to brokers at an earlier stage, so that people can see early on which products they are likely to qualify for.